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Court of Federal Claims: Putative Class Members Must Opt Into Class Action Within 6 Year Statute of Limitations

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From Law.com:

Big Class Actions Against the Feds May Falter

Plaintiffs lawyers say recent decision goes against more than a century of practice

Mike Scarcella
The National Law Journal
June 22, 2009

A case quietly winding through the federal courts in Washington could dramatically change the rules for plaintiffs across the country who file big-money class actions against the federal government.

Pending and future class actions may be chopped down to size if the U.S. Court of Appeals for the Federal Circuit agrees with the Justice Department’s strict interpretation of a six-year statute of limitations. Plaintiffs lawyers who handle such cases have issued dire warnings.

Earlier this year, in a takings dispute before the U.S. Court of Federal Claims, the Justice Department successfully argued that any class member who didn’t sign on to the litigation before the six-year window closed is barred from signing on at all. Justice’s win shuts the door to potentially hundreds of landowners in Kansas and Missouri who could be owed money for the government’s planned conversion of property along an abandoned railroad line into a public hiking trail. Only the original plaintiff, Earleen Fauvergue, can go forward in the case.

But the impact of what even Judge Christine Miller called a "draconian" interpretation of the law doesn’t end there. Plaintiffs lawyers say it goes against more than a century of practice and could severely limit the use of class actions against the federal government altogether.

Miller certainly recognized the wider consequences of her decision. If the government has its way, she said in a December hearing before she ruled, then it "really is a severe rethinking of class actions in this court, if not their abrogation."

The Court of Federal Claims, where the government is always the defendant and the dispute is always over money, handles many cases brought by private property owners looking for compensation for takings and by federal employees seeking overtime and back pay. When the liability is greater than $10,000 per person, class actions against the government must be filed in the claims court and not federal district court.

Plaintiffs lawyers argue that filing a class complaint within the six-year window should stop the clock from running against all those as-yet-unidentified class members. Cases involving hundreds of defendants often take considerable time to develop and finding all class members is not swiftly done, say the lawyers. Plaintiffs who don’t beat the clock will have to proceed in much smaller groups, individually or — as the lawyers warn — not at all.

In Fauvergue v. U.S., the plaintiffs have appealed to the Federal Circuit; their opening brief was filed this month. "Let’s be honest, the Justice Department in this case is attempting to take land owned by American citizens and avoid its constitutional obligation to compensate these citizens for the land it has taken," said Mark "Thor" Hearne II, lead counsel in the case. "I find this unconscionable."

Hearne, a partner in the St. Louis office of Lathrop & Gage, argues that Justice is misreading the U.S. Supreme Court’s decision last year in John R. Sand & Gravel Co. v. U.S. The high court ruled that the six-year statute of limitations is a jurisdictional limit that the Justice Department cannot waive. Hearne argues that John R. Sand & Gravel has nothing to do with the Fauvergue case because, among other things, it was not a class action.

A Justice spokesman, Andrew Ames, said in an e-mail that "Judge Miller’s decision fairly and properly applies the law."

LANDOWNERS LOST

In June 2008, the lawyers for Fauvergue, an elderly widow who lives in Missouri, filed a 50-page complaint in the claims court — nine days before the statute of limitations expired. Fauvergue represents a class of similarly situated plaintiffs who own land along the former Memphis Carthage & Northwestern Railroad Co. line linking Jasper County, Mo., and Cherokee County, Kan. A notice of interim trail use was filed against the land on June 21, 2002, triggering the statute of limitations.

The case is part of the nationwide litigation involving the Rails to Trails Act of 1983, which let local governments and private groups obtain easements to turn old rail lines into public trails. The plaintiffs in these cases argue that the government must pay for taking land for public trails.

Justice lawyers orally moved to dismiss Hearne’s effort to bring additional landowners into the case after June 21, 2008, when the statute of limitations expired. They said John R. Sand & Gravel "crystallized" the absolute nature of the six-year limit. (The statute says simply that a claim in the Court of Federal Claims "shall be barred unless the petition is filed within six years after such claim first accrues.") Environmental division trial attorney Kristine Tardiff argued that, without an exception from Congress, judges cannot expand or restrict the six-year period. She said that the Justice position is not novel and that Hearne, the plaintiffs lawyer, is making "broad-brush statements."

Miller mused in court that John R. Sand & Gravel had handed Justice a gift and now Justice was "experimenting with it and seeing what its reach is."

Six years might seem like a long time, but Hearne said it’s not. He said there’s often a delay between when the government initiates a taking and when the landowner learns about it — especially in these Rails to Trails cases. "Nobody knocked on [Fauvergue’s] door and said the government is planning to build a trail on her property in the future," Hearne said. That’s why litigation generally starts "late into that six-year period."

Hearne, who served as national election counsel to President George W. Bush’s 2004 re-election campaign, said there are more than 160 parcels in Kansas and Missouri in the Fauvergue case that belong to landowners who, without class action procedure, could not cost-effectively make a claim. In some Rails to Trails cases, he said, the amount of money owed is often smaller than the cost of making a claim. For instance, the government in a 1996 case paid $19,000 for the value of land and nearly $300,000 in attorney fees and costs. By contrast, in a 2005 class action that involved 116 parcels of land, the government paid nearly $7.4 million for the land and just $770,000 in attorney fees.

A LEGITIMATE IRONY

Roger Marzulla, a property rights specialist who has filed an amicus brief in the Federal Circuit appeal, agrees that the department’s take on John R. Sand & Gravel is devastating for class actions in the claims court. The department, he said, is expecting that individuals with small-dollar claims will abandon their claims because of the money and time required for an individual lawsuit.

"The real irony about this aggressive use of statute of limitations is that it undermines the whole notion that the Department of Justice is there not to beat down plaintiffs," said Marzulla, whose law firm, Washington, D.C.’s Marzulla Law, has an active practice in the Court of Federal Claims. "If they can beat it on a technicality, they don’t care whether the claim has merit or not. That loses sight of the whole purpose of the Justice Department."

Plaintiffs lawyer Ira Lechner, a solo practitioner who splits time between Washington and San Diego, calls the Justice Department "shortsighted" in its approach to Fauvergue and other class actions. Lechner is representing a class of former federal employees suing for back pay. Justice lawyers, citing John R. Sand & Gravel, argued that the statute of limitations should bar all claims in his case. Senior Judge Loren Smith of the Court of Federal Claims denied the government’s motion to dismiss about a month before Miller adopted the department’s position in the Fauvergue case.

"The Justice Department has completely rejected class procedure," Lechner said.

Hearne said he is "certain" that members of Congress do not support the Justice strategy. He points to an April 2008 statement by Sen. Richard Burr, R-N.C., chastising the department for employing a statute-of-limitations argument in another Rails to Trails takings case involving one of Burr’s constituents. Burr urged the department to settle.

Whether or not the Justice Department should be aggressively pushing the six-year statute of limitations, however, Miller noted in court this year that the government "can use any legitimate legal tool in its arsenal."